Creating a liquid timeshare resale market

[BocaBum99]

I posted this in a thread on Timeshare Forums entitled "Why is there no resale market?"

This view of the market supports my advocacy of laws requiring Timeshare HOAs to take deed backs and automatic termination of timeshare plans after a set period of time (like 25 or 30 years) unless voted by a super majority of owners to keep it as is.

The corollary of this idea is that service providers who liquidate timeshares for a fee provide a valuable service in creating liquidity in the timeshare resale market. Without them, more owners would be stuck in timeshares that should be taken back by the resorts for a fee.

========================

Why is there no resale market?

It is very simple economics.

Price is determined by the point at which the supply and demand curves for resale timeshares intersect.

There is a significant increase in supply due to:
1) a dramatically greater number of existing owners due to sales made between 2004 and 2008, a percentage of which always want to sell in any economic environment.
2) a greater number of owners who must sell due to one of many financial issues facing their families like the lack of a job.
3) a greater number of owners who are defaulting because they should have never qualified for a timeshare loan in the first place.
4) a large number of timeshare resorts that should self terminate, but, for one reason or another, cannot.
5) the proliferation of vendors who take a fee for liquidating timeshares. They are advertising everywhere.

There is a significant decrease in demand due to:
1) significantly reduced discretionary budgets of consumers
2) current owners who loaded up on cheap timeshares over the past 3 years cannot take advantage of additional timeshares at any cost.
3) the slow increase in educated buyers who are the market for timeshare resales.
4) rising maintenance fees making the rental market and own vs rent market less attractive.

The only way to create a situation where a market clearing price is higher than $0 is for both supply to decrease dramatically AND for demand to increase dramatically. That can happen if maintenance fees are significantly below the rate at which a resort will rent. That will create and sustain an investor market of people who will purchase timeshare units for profit.

Also, supply must be taken out by developers who will do so if and when credit markets ever return to a reasonable level. When that happens, they will start taking back free resale inventory to sell at retail.

Supply can also be taken out if resorts are allowed to terminate their timeshare plans. Selling off the land for an alternate use would net owners a lot of cash and put a price floor on timeshares.

Given the above, the requirement to solve the liquidity issue for the timeshare resale market is as follows:

Make a law in every state that requires a timeshare HOA to take deedbacks for all timeshare units for a transfer fee and 1 or 2 years maintenance fees. This will force the resort to do one of the following:
a) keep the maintenance fees low enough so that units can rent at a profit so owners will take over those units for a price higher than zero.
b) be so burdened with uncollectable fees that it must raise the annual fees to a threshold where owners vote to terminate the timeshare plan.

When the above happens, investors will buy up timeshares for potential capital gain when the timeshare resort is sold off and proceeds are distributed to all owners. Or, those same investors buy up property because there is a positive return on invested capital higher than the risk adjusted return for a timeshare rental.

All of the above will result in price floors that are higher than zero for resorts that remain.

 

[billymach4]

:

Make a law in every state that requires a timeshare HOA to take deedbacks for all timeshare units for a transfer fee and 1 or 2 years maintenance fees. This will force the resort to do one of the following:
a) keep the maintenance fees low enough so that units can rent at a profit so owners will take over those units for a price higher than zero.
b) be so burdened with uncollectable fees that it must raise the annual fees to a threshold where owners vote to terminate the timeshare plan.

When the above happens, investors will buy up timeshares for potential capital gain when the timeshare resort is sold off and proceeds are distributed to all owners. Or, those same investors buy up property because there is a positive return on invested capital higher than the risk adjusted return for a timeshare rental.

All of the above will result in price floors that are higher than zero for resorts that remain.

Boca,

Well how about writing to our hard working US Senators, and local Members of Congress to pass a bill at the federal level. Then the President can sign into law!

I think that would be the way to go as well.

 

[Beefnot]

Eh, it will work itself out in 5-10 years when the deadbeats and senior citizens get their timeshares into the hands of those better equipped to take on the payments for the next 25 years.

 

[malonem68]

Though I don't disagree with your economics 101 theories, I do disagree on how you propose to 'save the market'.

I don't think you can have a maint. fee so low because then the resort will become 'old' and then they won't be able to rent at any price because it is run down.

If you force an HOA to take the deed back you are basically saying, 'sign this contract, but, you won't have to abide by it'.

I think your theories assume most people want to get out of their timeshares, which I don't think is necessarily the case.

My thought to fix the market is to let the market work. If the gov. get's involved and forces HOA's to take back deeds, then you will for sure blow the market up and timeshares will be a thing of the past. That for sure will hurt more people than the maybe 15 - 20 percent who are stuggling with their timeshares now. (and that 15 - 20 percent is just a number off the top of my head....I can't imagine it is higher than that)

 

[AwayWeGo]

First Things 1st.

Well how about writing to our hard working US Senators, and local Members of Congress to pass a bill at the federal level. Then the President can sign into law!

I sincerely hope that our hard working senators & congresspeople & president will put that off till after they get all the other national issues resolved that are far more pressing.

After that, sure -- let'm see if they can apply their collective wisdom to the goal of perfecting the timeshare market.

And good luck with that.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[ronparise]

Eh, it will work itself out in 5-10 years when the deadbeats and senior citizens get their timeshares into the hands of those better equipped to take on the payments for the next 25 years.

actually I think the solution will be the senior citizens. We have the time and many of us have the money to pay for and use multiple timeshares..but we will sit on our wallets and stay home or rent if maintenance fees are more than comparable rental rates (what Boca said).

like you, however, I dont believe new laws are needed; only some folks on the hoa boards with half a brain to see the merits of taking back unproductive intervals and getting them into the hands of happy owners like me

Every time I see a week at one particular resort available for less than a few hundred dollars, I buy it...Why hasnt someone on the board seen this activity and offered me hoa controlled inventory...it doesnt make sense...what it has done is convince me to get into the pcc business. If the hoas dont want them, Ill take them..theyll get them sooner or later, but Ill have the money

 

[chapjim]

I sincerely hope that our hard working senators & congresspeople & president will put that off till after they get all the other national issues resolved that are far more pressing.

After that, sure -- let'm see if they can apply their collective wisdom to the goal of perfecting the timeshare market.

And good luck with that.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

Like they improved medical care and the housing market and financial institutions and toilets and light bulbs and railroads and the auto industry and . . . .

 

[ronparise]

I once knew a guy that built houses and then sold them to young families with a low down payment and owner financing....I had shopped every bank within 40 miles of my home and couldnt get a loan for a decent home...This guy was willing to finance me...I asked why. Why was he willing to take a risk the banks wouldnt take...his answer taught me a lot...He said if I was to default, the bank would have to foreclose, hire a contractor to repair any damage and then hire a real estate agent to sell it....this took money and time, and they really didnt want to have to foreclose (bad for their image) He went on to say, that he didnt care if I paid him or not...if I didnt , he would be happy to foreclose, he was a contractor and could fix it up over night and he was a licensed real estate broker. He expected to be able to have it sold to a new buyer quickly. He would make money if I paid him on time, but make more if I defaulted. he would have new product to sell with next to no new capital requirements...by the way..he built a good house, at a good price..I dont think he had a single customer default

Wyndham is now taking over busted condo developments and selling them as timeshares..they make about a 50% commission and get a new management contract..why couldnt they..and the other developers and the hoas, take back their own product and re sell it. if was a good product at a good price, I think it would work

 

[timeos2]

Be aware that no law that retroactively removes or changes owners deeded rights - such ad forcing them to accept others deed backs - would never stand up in courts. You can make that yhe rule or law for new buyers but not existing owners. To think otherwise is asking for something that cannot be done unilaterally even by the government. Its simple law.

 

[Beefnot]

HOAs do things that individual owners don't like all the time. They just need a majority vote.

 

[KarenP]

I think the real problem is there's no difference in value between "new" and "used"

It's not like buying a used car where there is a vigorous market for older models, because the "used" timeshare has the same value as the "new" timeshare. I think that's what is keeping a secondary market from developing by anybody--nobody knows how to deal with the value question.

 

[AwayWeGo]

You Typed A Mouthful.

It's not like buying a used car where there is a vigorous market for older models, because the "used" timeshare has the same value as the "new" timeshare.

Same value, same everything.

As a practical matter, there is no such thing as a a new timeshare.

By the time the owner shows up & checks in, other people will already have been staying there previously -- right there in that very same timeshare unit, just like a hotel room.

Any way you shake it, that's not new.

By any honest way of looking at it, that's used-used-used.

Basically, the full-freight timeshare sellers are offering used timeshare units at new prices.

Makes loads more sense to buy'm at used prices on the resale market -- way less money (or even free) for exactly the same thing as full freight, or the equivalent, or something even better.

Biggest no-brainer in the world of vacation travel accommodations.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[timeos2]

HOAs do things that individual owners don't like all the time. They just need a majority vote.

HOA Boards are not all powerful. When it comes to the documents that formed the original sales agreement that is off limits to the Board & all they can do is propose to the owners that a change be made. To actually do it requires a super majority owners vote agreeing to any change in those rights. Since many resorts can barely get a quorum for annual meetings - lots of luck getting what may be seen as a negative move by the owners approved by a super majority.

 

[ampaholic]

Be aware that no law that retroactively removes or changes owners deeded rights - such ad forcing them to accept others deed backs - would never stand up in courts. You can make that yhe rule or law for new buyers but not existing owners. To think otherwise is asking for something that cannot be done unilaterally even by the government. Its simple law.

I agree, and will ad that this entire thread is frivolous since it ignores the basics of property law.

Any workable solution to the "timeshare glut" issue has to solve a simple fact:

Timeshares are in the essentially same situation as CRT TV's were a few years ago: Lots of people have them and they are nearly worthless (except to watch TV).

Requiring the stores that sold these CRT TV's to "take them back" would be just as ludicrous as requiring HOA's to take back intervals that they only provide collective management for (didn't even sell).

 

[Ridewithme38]

I agree, and will ad that this entire thread is frivolous since it ignores the basics of property law.

Any workable solution to the "timeshare glut" issue has to solve a simple fact:

Timeshares are in the essentially same situation as CRT TV's were a few years ago: Lots of people have them and they are nearly worthless (except to watch TV).

Requiring the stores that sold these CRT TV's to "take them back" would be just as ludicrous as requiring HOA's to take back intervals that they only provide collective management for (didn't even sell).

If only you could leave a TS at the curb like you could an old CRT TV....

 

[ampaholic]

If only you could leave a TS at the curb like you could an old CRT TV....

Isn't that e.bram's line?

 

[kenie]

If only you could leave a TS at the curb like you could an old CRT TV....

If you are giving a timeshare away, isn't it basically the same thing???

 

[Ridewithme38]

If you are giving a timeshare away, isn't it basically the same thing???

Most Timeshares can't even be given away

 

[rrlongwell]

Most Timeshares can't even be given away

I am not sure this is true for Worldmark and Wyndham Vacation Resorts. On E-Bay, Worldmark appears to be holding its own for bid price over time and Wyndham Vacation Resorts appears to be holding in the 75-125 range for timeshares on the market at anyone time. Given the huge number of timeshares that are under the control of Wyndham Vacation Resorts, this is a remarkable low number. I am also seeing fewer and fewer good resorts on E-Bay for Wyndham Vacation Resorts at all and when they are there, there are only a very few at a time. Fact Check Time?

 

[Ridewithme38]

I am not sure this is true for Worldmark and Wyndham Vacation Resorts. On E-Bay, Worldmark appears to be holding its own for bid price over time and Wyndham Vacation Resorts appears to be holding in the 75-125 range for timeshares on the market at anyone time. Given the huge number of timeshares that are under the control of Wyndham Vacation Resorts, this is a remarkable low number. I am also seeing fewer and fewer good resorts on E-Bay for Wyndham Vacation Resorts at all and when they are there, there are only a very few at a time. Fact Check Time?

All timeshares can't even be given away?

 

[kenie]

All timeshares can't even be given away?

Well played ride..... lol

 

[Carolinian]

Boca ignores one of the main factors in people wanting out, exchangers upset at changes at exchange companies, primarily RCI. The own to use owner base is far more stable. The exchanger owner base used to also be fairly stable, but that has changed dramatically.

One of the main solutions for HOA's is to gear resales to an own to use market.

He also focuses on one tiny fraction of the resale market, eBay, and that has been deliberately flooded by the PCC's to kill it off. I had the HOA resale portfolio for a number of years on my HOA board, and we sold on eBay, Yahoo auctions, and similar sites. I watched the PCC's sales channels arrive, flood the eBay market, and kill it. Since that worked into their come on to potential clients, I would suspect that this impact was intended rather than just an unintended consequence of their activities. PCC sales are the cause more than symptom of dead eBay sales. Again, I watched that as it happened.

In my area, if you look at markets broader that eBay, it is clear that the timeshare market is still viable for resales. I suspect that is true in many others. Internet oriented people look mostly to places like eBay as sales outlets, but the key is to not limit yourself to those.

Boca, since you are a consistent defender of the PCC's, I have a question for you. You are a timeshare reseller yourself. Do you buy some of your inventory from PCC's and is this at least part of why you always jump to their defense?

 

[ronparise]

PCCs dont need defending ....they simply are. Just like the guys that pick up my trash, they are there to pick up my timeshare when I am ready to dispose of it...and just like the trash man...its a job that needs doing

ebay is not the only place to buy or sell a timeshare, but it works.

and the point I have been making to anyone that will listen (and I think Bocs point too) is that the hoas already have to take my timeshare back....they really have no choice. The question is do they want to do it the hard expensive way and foreclose, or do it the easy and cheap way and establish an orderly procedure to make it happen

Ive already decided my exit strategy...Ill offermy stuff to the poa, Ill offer it on TUG, and Ill offer it on ebay...if there are no takers Ill stop paying mf...If you think thats an acceptable strategy, than you are right. The hoas dont have to take deed backs, but if there is something you dont like about an hoa having to foreclose, you will petition your hoa to start thinking about a deed back strategy

 

[AwayWeGo]

You Typed 1/2 A Mouthful.

Timeshares are in the essentially same situation as CRT TV's were a few years ago: Lots of people have them and they are nearly worthless (except to watch TV).

Yeh -- but unlike semi-worthless timeshares, those old-style TVs don't keep on costing you money year after year, world without end amen.

So it goes.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[ampaholic]

Yeh -- but unlike semi-worthless timeshares, those old-style TVs don't keep on costing you money year after year, world without end amen.

So it goes.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

Alan I'm hurt - I only get the "1/2 a mouthful" award - I stayed up all night thinking of the CRT TV analogy.

I guess if you got your CRT TV from Aarons and were required to pay the 9.95 weekly vig to them it would be a better analogy.